Like most things in life, flipping cars has a bit of a learning curve.
You simply don’t know what you don’t know. And there’s nothing wrong with that.
I grew up watching my dad flip cars, so my learning curve was much smaller than most. It was smaller because I had someone there to walk me through the process. That’s what The Car Flip is all about!
While I’ve only broken even a few times, I’ve been fortunate to have never lost money on a car. That’s due in large part to having access to someone that’s done it before – my dad. When I didn’t know something, he always seemed to have the answer.
The following are the five most common mistakes I see beginner car flippers making.
1. They’re Too Trusting. Most people selling their cars on sites like Craigslist will be honest about their vehicles, but it only takes one time to lose significant money.
Most sellers will tell the truth, yet there are some that will say almost anything to convince you to buy their car.
I recently called about a Jeep Wrangler that the listing said just needed a few “small repairs”. I called, and the guy told me it was having trouble shifting from second to third gear. He said it was just a simple repair, only a $30 part. As I was about to end our conversation he mentioned the engine had a slight knock too. He was pretty sure it was just lifter noise.
What that vehicle needed most likely was both an engine and transmission replacement. He may or may not have been lying about what he knew. But if the problems were as simple as he said, why hadn’t he fixed them?
If you have a bad feeling about a car, don’t be afraid to walk away. I’d rather regret missing a deal that have bought a clunker.
2. They Don’t Do Their Homework. Homework was my least favorite part of school (right behind oral book reports), but I understand it’s purpose a little better now.
When flipping cars, it always helps to be prepared.
Doing our homework on cars will help us not only get better deals, but avoid bad ones
The following are things you should know before you buy a car: How much is it worth? How much should you pay for it? What problems is that vehicle known for? What profit do you stand to make? What is your plan for negotiating?
The more homework you do in the beginning, the less you will have to do later. Eventually you will know how to gauge deals on the fly, you will know common issues to look for, and you will instinctively look for areas to negotiate.
3. They Focus On The Wrong Cars. Certain cars are more profitable than others, and some cars should be avoided altogether.
Cadillacs with the 4.6 L and Chryslers with the 2.7 L engines are both examples of vehicles to avoid.
I’ve learned this from experience, but a simple Google search of those two engines will tell the story. The Cadillac 4.6 L and the Chrysler 2.7 L engines are junk. I wouldn’t buy one. Ever.
I focus on vehicles that are in high demand. This will be different depending on where you live. Where I am, Jeep Wranglers, Chevy Tahoe/Suburbans, Hondas, and most any pickup trucks are all high demand vehicles.
You can easily determine what vehicles are selling in your area with a just few simple phone calls. Simply get on Craigslist and call on vehicles that have been posted for about a week. If they’re sold, ask what they sold for.
For vehicles that sold, you now know what people are willing to pay.
Car flipping in a nutshell involves buying a car for less than what it’s worth and then selling it for that.
4. They Don’t Negotiate Correctly. When I say “correctly”, that’s assuming you will always try to negotiate. What you pay for a vehicle is where the money is made. Period.
There is no set amount you should get the buyer down on price. The key is knowing the price you need to pay for the car before you even get there.
For me, my goal for every car I flip is to buy it with the potential to make $2000. That doesn’t mean I make $2000 on every car I sell, but it should at least be a possibility.
Occasionally a deal will be priced so well you won’t be able to negotiate at all. I recently bought a Jeep that I only got the seller down on price $100.
That Jeep was priced so well I didn’t need to get the seller down. I was the first person to call so he let me look at it first. He had five other people that had made him full price offers by the time I got there. It would have been stupid of me to think I had to get him down on price.
I paid him $6400 on the spot. I sold it three days later for $10,500.
While the above profit isn’t typical, it’s not unattainable.
Remember that you make money at the buy. Know what the car is worth. Make an offer. Buy the car. Flip it.
5. They Avoid Cars That Need Work. Buying cars that need work can be a gold mine if done correctly.
Finding deals isn’t always easy. That’s due in part to the fact that you’re not the only one looking for those deals.
That’s the beauty of vehicles that need work. They’re less desirable, especially to the owner who just wants it out of their driveway.
But what if you’re not mechanically inclined?
I do a lot of my own repair work, but I have never personally overhauled an engine, painted a vehicle, or replaced a transmission. But I buy vehicles with these types of issues all the time.
I can do that because I have a great mechanic. He’s actually a retired guy that does work on the side. He’ll replace most engines and transmissions for around $300.
So when I see a 2004 Ford Explorer with 134,000 miles that has a bad transmission, I know the labor to replace it would be $300. I then check car-part.com to see how much the transmission will cost. An Explorer tranmission can easily be bought for around $600 (I’ve paid as little as $400).
Going with the $600 price on the transmission and the $300 labor to install, I would have a total repair bill of $900.
I’ve bought Explorers like this for $500. Using that number my total investment would be $1400. That vehicle should easily sell for $3500. Netting a $2000 profit.
The key is finding a reliable mechanic that works reasonably. This will generally be a mechanic that does work on the side not a big name garage that charges by the hour.
A great resource for finding a good mechanic is to ask a used car dealer who they use. They know people that do work cheap. I know this because that’s how I found many of the people I currently use for repairs.
I hope this list helps you avoid these common mistakes people make buying a selling cars for profit.
The only people that can’t make extra cash flipping cars are those that are too afraid to start. You can do this. I’m here for you if you’re just starting out.
I was freaking out on the inside while I was buying my first car, but I’m so glad I did.
I wouldn’t be where I am today if I hadn’t.
Is there something you have a question about? Feel free to ask in the comments below!
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